In this video, John Paul takes a Blueprint Trade, the main strategy taught in the Power Price Action course. Since the strategy is based entirely on price action, only time and price movement are considered for recognizing the entries and calculating the profit target and stop loss. The Bar Timer tool is used to let us know the time remaining in the currently plotting candle. It’s a countdown indicating when the current candle closes. Once the candle closed, John Paul entered the trade long at 1618.75. With NinjaTrader’s Chart Trader enabled and an ATM strategy in place, you can see the profit target and stop loss lines on the chart. The profit target is easy to calculate for this trade. Based on the current ATR (Average True Range) value, it’s two points. The stop loss is at 1615, which is 3.75 points below the entry. John Paul did not expect the stop loss to get hit, but it’s always important to have one in place in case the market suddenly takes off. Sometimes, when stops are too tight, regular market fluctuations can take you out of a trade prematurely when your profit target may have otherwise been reached. There are a few other stop strategies taught in the course such as the prove-it and time-based stops. For this trade, it’s just a matter of waiting for price to move through the profit target. With Power Price Action, there are no Fibonaccis, MACDs, bands, channels, or Market Profile techniques. It’s all price action – the way candles plot on the chart.
Ron Wichgers, an Atlas Line trader and trading instructor from the Netherlands, recently shared with us his thoughts on analyzing trading system performance. Using the Atlas Line data from our recent trades page from Jan. 1, 2013 through May 31, 2013, he’s created the graph below. Based on his professional trading experience, he’s also provided us with the following commentary.
The blue-grey line represents the performance of trading the Atlas Line from 9:30 a.m. to noon US/Eastern without broker transaction cost or slippage (using data from the Recent Trades page).
The red-pink line is the same as the blue-grey line only with my broker transaction costs added in.
The orange line represents the moving average (50) of the equity curve with transaction cost.
The bottom green-blue line represents the outcome per trade.
The Importance of Record Keeping
Whether you trade your own system, follow a signal service, or purchased a system like the Atlas Line, the first thing a trader needs to do is build a good track record trading that particular system. Good record keeping is not just to show how good your trading is. Good record keeping can help determine the strengths and weaknesses of a system.
To trade with confidence, you need to see how your system has performed in the past. However, this is not a guarantee for future results; it’s the best we have. When you plot the outcome of your trading in a graph, you can see system’s characteristics. These observations can help gauge reliability and boost your confidence in the system.
Every trading system, no matter how good it is, has it’s drawdowns. To plot an equity curve, you need to know how big the historical drawdowns are, how long the recovery period is when climbing out of the drawdown, and how frequent drawdowns occur. This is very important because we need this knowledge to trade with confidence in the future. Otherwise, you will give up trading when the first drawdown appears. Then you may be inclined to hop to another system where the same cycle of “drawdown, time to switch” starts again. That’s a guarantee for disaster.
The benefit of an equity curve is that you can easily see when your system’s performance differs from its “normal behavior.” When you come to an point that you have abnormal behavior like a drawdown that is much bigger or longer compared to what has happened in the past, this could be a warning sign to maybe reevaluate your system and at least slow down your position size for a while. Of course, this is not the best way to climb out of a drawdown, but it may prevent you from trading a system that is losing money. Maybe your system is not made for the current market conditions and you better wait for normalization of the market. In this example, consider the market conditions may be either too volatile or too slow for your trading system.
Another benefit of an equity curve is that you can easily see when the time is right to trade an extra contract. The equity curve you see in the picture uses one contract. That’s a good base to start with. When you have made a certain amount of money, you can add a contract and also plot the outcome with that extra contract in a different sheet, etc. Trading with multiple contracts is a way to give your trading an extra boost. When considering drawdowns, profits, broker commissions, and number of contracts traded, determining proper money management is of great benefit.
When do you add an extra contract? Of course, this is a very personal financial decision and it depends on the size of your trading account and your system’s performance. To determine when you add an extra contract, look at your equity curve. To stay in the “safe zone”, you must have made at least twice the size of the maximum historical drawdown. Why is this important? Well, to make the step from one contract to two contracts, that is a 100% scale up. In effect, if you end up in a drawdown right after you have scaled up, you may be in trouble because you also have to scale down again if you are back on the level where you have scaled up. You better try to avoid this situation.
You can easily calculate when you have to scale back down to one contract, but it’s better not to have to scale down too fast. It’s very easy to dig a hole with a giant scoop, but it’s a hell of a job to fill that hole again using a small one. Remember that each time you may scale up, percentage-wise, the steps become smaller.
How can you tell if an equity curve is the “safe zone”? I do plot a moving average of the equity curve. When this moving average is pointing down, that’s a warning sign for me.
At about 5:30 into the video, you can see John Paul enter a live trade in front of the attendees. The Atlas Line said to go long at 10:00 a.m. Using his live account, he bought the market at 1630.50. The ATR was at 3.48, so John Paul’s profit target was three points (by rounding down). His stop loss was five points (also based on real-time market conditions). You can see how he drags the profit target and stop loss around on the NinjaTrader DOM window. You can also do this on the chart using the Chart Trader feature. The green profit target and stop loss lines get automatically placed on the chart because of the ATM Strategy John Paul has in place. The ATM strategy did not fit the real-time market conditions, so he had to re-position them. By 11:00 into the video, the trade is over with John Paul making 3 points of profit. Even if you were trading one contract, that’s a profit of $150 without broker fees. John Paul was trading 10 contracts, so the trade was worth $1500.
Here are some of the answered questions and statements asked by attendees:
Mike: Would you have a short sitting below that price for a break out to take you in the market?
TA: are your decisions only n 5 min charts?
Mike: Your profit target is the previous highs. Would you adjust the targets or leave them no matter what?
Frank: can you please explain the entry process?
Mike: If there was news at 10:00 would you wait until after the news?
Tom: are your posted results taken from the room?
tony: new to this ..so what is your profit so far
Dean: Do you recommend starting out on the 5 minute chart?
Will: you get another Atlas line today, or will you use this one all day?
NJ: How far away from ATR would you enter as your prove-it-stop may be too big?
Dean: How does the Atlas line handle ranging markets?
Dean: Very stringent rules based trading. I like. Instills discipline win or lose.
Some of the attendees were John Paul’s Mentorship students. Here’s what they had to say:
Najam: i took the trae 4 contracts
Guess: i took it with 5 contracts
Chris 2: Been using your ATO successfully for last 2+ years. Thanks
Chris 2:You are one of the MOST Honest Trading Instructors I’ve encountered and it works!!!
dick: To all who are contemplating signing up for J Pauls mentorship I would encourage you to enroll. I’m 75 yrs young and this is the best systems I had experienced.
On June 5, 2013, the Atlas Line produced a short signal at 1626.50 on the close of the candle at 9:55 a.m. US/Eastern. Remember, the rule is two closes above or below the line for an entry signal. You can see how there was a doji that precedes the 9:55 a.m. red candle. With this short signal, John Paul used the ATR to determine his profit target of 2 points. John Paul’s ATR is configured to user a period value of 4 (last four bars) to indicate the Average True Range. His sell order was accepted at 1626.75. Therefore, his profit target is 1624.75 (two points profit to the sell side). With the ATR, you can see how it’s of benefit to base your potential earnings on what the market can realistically produce under real-time market conditions. Our goal is to reach profit as quickly as possible; not hold a trade longer than four bars (or 20 minutes). In this video, the profit target was hit very quickly as the market was at a good level of volatility (the ATR was between 2 and 4). If you take a look at how the rest of June 5 panned out, you’ll see it was mostly a trending day with price staying well below the Atlas Line for numerous short trade opportunities. Remember that live training is included with purchase of the Atlas Line. You’ll learn all of the rules to make trading straightforward and consistent.
On June 3, 2013, the Atlas Line produced a Short signal around 11:00 a.m. Note that the actual text for the Atlas Line always plots a few bars back from the actual entry. So the price and time for the entry is really 1626 because you enter when there are two candles closing above or below the Atlas Line. John Paul draws an arrow showing the point of entry at about 28 seconds into the video. See the Long signal at 1632 as a comparison. Yes, the Atlas Line gives you exact entries so you know when to “buy the market.” This portion of calculating the entries is automated. You have to manually position the profit target and stop loss according to the rules John Paul teaches you during the client-only training.
While buying the market at the entry price (aka placing the order), you’ll notice the ATR (Average True Range) value can be rounded to 3.25. This 3.25 is our profit target – 3.25 points – the amount we’re hoping to profit from on this trade. We know exactly how much to go for based on what the current market conditions can produce. We use an ATR with a period value of four for this calculation. The E-mini has been more volatile as of late, allowing for bigger moves. It’s a nice change considering the relatively slow conditions of previous months.
If you do the math, 1 tick on the ES is worth $12.50 USD. Four points are in a tick. On the ES, a profit of 3.25 points is $162.50 while trading one contract. If you trade two contracts, that’s $325.00 on this one trade, excluding the broker round-turn fee, which would probably be around $9.00 for two contracts. Not bad! And according to John Paul, the previous trade in the video would have also been a winner.
A new Group Private Mentorship class begins June 20, 2013. Eight weeks of live training with John Paul will teach you everything you need to know to successfully trade futures and currencies. All courses and software are included with lifetime licenses. This new session has classes twice each week.
We expect this new session to fill up quickly. It’s a good idea to reserve your seat as soon as possible.
Remember, group training includes:
• Eight weeks of live training with DTTW founder John Paul
• Each training session is recorded for future playback reference
• All courses and software with lifetime licenses and digital books
• In total, 11 unique methods to trade price action are taught – unlike anything you’ve traded before
• Training goes above and beyond the written material
• Look at each day’s activity and ask questions to improve your understanding with expert insight
At DayTradetoWin, we often get asked, “What is the Roadmap trade?” We can’t tell you exactly what it is, as it’s taught in the Mentorship Program only. We can tell you that it’s based on a specific price pattern that occurs quite often when the market is manipulated. It’s the main filtering technique we teach our Mentorship students. It precedes all other methods we teach when everything is pieced together at the end of Mentorship. Sometimes the Roadmap gets confused with the Blueprint trade. The Blueprint an entirely separate method that’s taught in the Power Price Action course and Mentorship.
In this video, John Paul uses his live account and 12 contracts to make the most of a seven tick (1.75 point) profit target . His stop loss is 14 ticks (3.5 pts). The profit target and stop loss is based on real-time market conditions. We teach traders how to use the Average True Range (ATR) to dictate risk and reward potential. If the market is slow, the profit target and stop is tighter. Likewise, a more volatile market will move more, and thus allow for greater potential reward or loss. In most cases, John Paul will hold a trade no longer than 20 min. (or four bars on a five-minute chart). The Roadmap is not bound by the same limitations, as seen in the video’s time lapse. Remember, if you move your limit order around, you’ll essentially “step out of line” and lose your spot with the first-come, first-served rule of trade execution. It’s better to keep them where they are unless you’re following our rules for trade management.
You can learn the Roadmap trade and about 10 other price action methods that all fit together. You’ll have a complete plan for trading objectively every day. The next Group Mentorship program begins June 20, 2013 and classes will be Tues. and Weds. from 3 p.m. to 4 p.m. US/Eastern. Give us a call or send us an email to get enrollment details.
Power Price Action is a four DVD trading course that you get in the mail. Each DVD teaches very effective price action trading methods. The most powerful of these methods is the Blueprint Trade, also called the Blueprint Setup. In this video, John Paul takes a Blueprint trade on the E-mini S&P 500. By recognizing the Blueprint pattern and trading the rules, you can be consistent with your results just like John Paul.
What is the Blueprint trade? You’ll have to get the course to know exactly. You’ll learn how to interpret what price is doing, and a very specific entry, stop, and profit strategy that works whether you’re trading stocks, futures, currencies, or forex.
The ATR (Average True Range) dictates the Blueprint trade’s profit target. In this video, it’s six ticks. At this point in time in the video, we can reasonably expect the market to move this amount based on current volatility.
The eight weeks of live training included with Power Price Action ensures you’re trading the method correctly. It’s easy to read a day trading course and misunderstand the rules. John Paul makes sure you fully understand by sharing his charts with you once a week while going over all the recent trades.
The bonus X-5 guide, also called the Floor Trader Secrets Manual, teaches you an entirely separate method of trading nothing but price action. You’ll learn additional entry, profit target, and stop loss rules to be used in conjunction with your current strategies or standalone.
The Trade Scalper method uses a one-minute chart with a goal of making 2-4 ticks on each trade. Trade Scalper setups occur multiple times each day across a variety of markets. This is essentially what scalping is – going for small profit increments all day long. The setups are completely based on price action. Although an indicator is included for Trade Scalper entries, you are advised to trade without it just by knowing the candle patterns and the rules.
In this video, John Paul goes for a 3 tick profit on the E-mini S&P 500. John Paul recognized a trade at about 1:35 p.m. on May 22, 2013. His entry was at 1669.25, again going for 3 ticks. Since he’s going short, he’s looking to make money when price drops 3 ticks. Three ticks from his short entry is 1668.50 (the profit target). It takes a few minutes, but price eventually “tags,” then passes through the profit target, for a 3-tick profit. How much money is 3-ticks? For each E-mini contract, each tick is worth $12.50 USD. So with one contract, the profit for this quick trade is $37.50. With two contracts, you would double this amount. You also have to consider the cost of broker fees, which vary. Remember, the goal is to trade a reasonable amount of contracts once you’re comfortable with the method and trade multiple times a day with the Trade Scalper.
Here’s a more recent video showing a Trade Scalper trade on May 23, 2013:
Part of being a successful trader is staying up to date with the latest developments in technology and finance. If you haven’t noticed, world currencies have been a mess in recent years, destabilized by manipulation, politics, and a host of other reasons. It’s important that you’re aware what Bitcoin is and how it attempts to solve problems that plague traditional currencies.
What is Bitcoin?
Simply put, Bitcoin is a decentralized digital currency and cash system. In this case, decentralized means there is no central, real-world governing body or regulation authority that oversees Bitcoin transactions. With traditional currencies such as the U.S. Dollar, Euro, etc., a central bank prints currency as needed.
What is the Bitcoin curreny based on?
In history studies, you’ve probably investigated what the U.S. dollar actually symbolizes. At one time, the gold standard linked U.S. dollar value directly to gold. Since President Nixon’s actions in 1971, the U.S. dollar has been somewhat abstract when trying to establish its link to any physical commodity.
Bitcoin is truly different in this sense. The value of Bitcoins were intentionally made rare using a mathematical formula (algorithm). Through a process called Bitcoin mining, a computer is given a complex mathematical problem to solve. If your computer can successfully solve this algorithm to produce a special 64-digit number, you become the proud owner of 50 Bitcoins. You can imagine the amount of computers in the world cranking around the clock to derive these special numbers. Only 21 million Bitcoins that will ever be created in total, with this total reached in the year 2140. There’s a market for Bitcoin mining pools and building computers dedicated for the purpose of Bitcoin computation. What’s to stop a supercomputer from deriving destabilizing the Bitcoin currency? The Bitcoin network automatically adjusts the computational difficulty of the mining algorithm, ensuring a new block of 50 Bitcoins can only be produced approximately every 10 minutes. It’s designed to be self-stabilizing. Last year, miners generated approximately $16.7 million. At press time, a single Bitcoin was worth roughly $130 USD.
Huh? Candles for this relatively new and unregulated currency? Yes, you can actually trade Bitcoins.
What about Bitcoin security?
A host of technologies are used to ensure the integrity of the transactions and stability of the currency. In addition to the automatically adjusting algorithm described above, a P2P (peer-to-peer) system keeps transaction direct from buyers to sellers. In this sense, transactions are similar to torrents. Digital signatures and an open-source, cryptographic protocol serve to authenticate exchanges. According to a PC World article, “Gonzague Gay-Bouchery, who heads marketing for Mt. Gox, said the exchange is slightly limiting the number of mini-transactions a trader can submit and capping the transactions during high trading times.” If successful, this would successfully prevent Bitcoin from becoming subject to the same overwhelming high frequency trading that occurs in regular equities, futures, commodities, etc.
What are Bitcoin exchanges?
For a digital currency to be successful, it needs to be easy to buy and sell. Exchanges, in the form of websites, serve to facilitate this buying and selling. Mt. GoX, located in Japan, is the most popular exchange, claiming to handle over 80% of all trade. If you click the gray banner at the top of the page, you’ll get a drop-down chart just like we posted here. You can see buying and selling price over time just like you do in your regular trading platforms. Currently, the best place to watch real-time Bitcoin market data and charts is this site. Note that it takes about a minute for market data to load. The programmer of this page is working on a standalone trading platform Bitcoin exchange markets. The Mt. GoX exchange lets users deposit into a Bitcoin account from regular currency using a bank transfer. Likewise, Bitcoins can be converted to regular currency and placed back into a bank account. Popular websites such as WordPress, Etsy, and Reddit accept Bitcoin.
What are some Bitcoin’s criticisms?
This Forbes article describes how Bitcoin may be a disruptive technology. On occasion, hackers have attacked Bitcion, causing the value of the currency to approach levels of worthlessness. One can speculate that hackers can also cause Bitcion value to rise, although real-world markets are subject to manipulation as well in the form of high frequency trading algorithms and institutions with large accounts. Because of Bitcoin’s inherent anonymity, it is used by shady parts of the internet for the buying and selling of illegal goods.
What do you think? Do you think Bitcoin is just a trend or bubble that will burst?
Would you feel safe investing in Bitcoins?
Do you have any reason to use Bitcoin now?
CFTC RULE 4.41 – HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING. ALSO, SINCE THE TRADES HAVE NOT BEEN EXECUTED, THE RESULTS MAY HAVE UNDER-OR-OVER COMPENSATED FOR THE IMPACT, IF ANY, OF CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED TRADING PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFIT OR LOSSES SIMILAR TO THOSE SHOWN.
GOVERNMENT REGULATIONS REQUIRE DISCLOSURE OF THE FACT THAT WHILE THESE METHODS MAY HAVE WORKED IN THE PAST, PAST RESULTS ARE NOT NECESSARILY INDICATIVE OF FUTURE RESULTS. WHILE THERE IS A POTENTIAL FOR PROFITS THERE IS ALSO A RISK OF LOSS. A LOSS INCURRED IN CONNECTION WITH TRADING FUTURES CONTRACTS CAN BE SIGNIFICANT. YOU SHOULD THEREFORE CAREFULLY CONSIDER WHETHER SUCH TRADING IS SUITABLE FOR YOU IN LIGHT OF YOUR FINANCIAL CONDITION SINCE ALL SPECULATIVE TRADING IS INHERENTLY RISKY AND SHOULD ONLY BE UNDERTAKEN BY INDIVIDUALS WITH ADEQUATE RISK CAPITAL.
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A new Group Private Mentorship class begins June 20, 2013. Eight weeks of live training with John Paul will teach you everything you need to know to successfully trade futures and currencies. All courses and software are included with lifetime licenses. This new session has classes twice each week.